Retail Investors’ valuation of structured investment instruments
Online Research Seminar
3:00 pm, Thursday, 9 December 2021
The retail interest in structured investment instruments has expanded over the last decades due to the negligible deposit interest rates and the lingering uncertainty in the stock markets. Instruments that mix capital protection with a possibility to gain from positive performance of an underlying asset appear especially popular. The first part of the talk will briefly survey the market for retail-oriented structured investment instruments and discuss the results of the accumulating research on the topic. The second part of the talk will present results from experiments aimed at characterizing the preferences of prospective investors over field-like structured deposits in scenarios where the terms of the deposits are explicitly clear. The experiments illustrate that investors exhibit non-standard risk appetite in the valuation of capital-protecting instruments; e.g., they tend to underweight the tail events where the instrument may bring a loss. The complexity of structured instruments, in addition, may mislead private investors into choosing dominated (inferior) alternatives, even when the terms of investment are explicitly clear.
About the speaker
Doron Sonsino has a Ph.D. in business economics from Stanford University Graduate School of Business and holds an MSc in Operations Research (with excellence) from Tel-Aviv University Management School. Doron was a faculty member at the Israeli Technion and at the College of Management Academic Studies, and is currently affiliated with Ben-Gurion University Economics department. In his early career Doron worked as a financial journalist covering the Israeli Capital Markets. Doron’s main current research field is the financial decision of private investors. In recent projects, Doron and his co-authors use framed-field experiments and surveys to explore the financial decision of finance students and professionals. The data is analysed in light of formal models of choice under uncertainty and hypotheses stemming from the finance and psychology of decision-making literatures. Doron’s recent projects particularly explore the valuation of retail-oriented structured investment instruments and issues related to forecast-confidence, overconfidence and trading propensity. Doron is an associate editor at the Journal of Behavioural and Experimental Economics.